GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--National Bank Holdings Corporation (NYSE: NBHC) reported net income of
$3.0 million, or $0.06 per diluted share for the fourth quarter of 2012
compared to the third quarter of 2012 net loss of $0.15 per diluted
share. The third quarter included $10.8 million of after tax costs
related to the successful initial public offering (IPO) in September
2012. Excluding the IPO related charges, net income for the third
quarter of 2012 was $2.9 million, or $0.06 per diluted share.

“We continued to build momentum during the quarter in the growth and
expansion of client relationships,” said President and Chief Executive
Officer Tim Laney. “This was evidenced by our eighth consecutive quarter
of increased organic loan production and solid growth in our
non-interest bearing client demand deposits.”

Fourth Quarter 2012 Highlights

Grew organic loan production for the eighth consecutive quarter,
resulting in a 15.1% annualized growth in our strategic loan portfolio.

Grew average non-interest bearing demand deposit balances 16.6%
annualized, driving an increase in average transaction deposits of
4.0% annualized and an 11 basis point decrease in total cost of
deposits.

The net interest margin expanded to 4.09%, driven by higher yields on
loans accounted for under ASC 310-30 loan pools and lower cost of
deposits.

Net charge-offs on non 310-30 loans were 0.27% annualized.

Expenses before problem loan/OREO workout expenses were flat third to
fourth quarter, adjusting for the third quarter IPO expenses.

Problem loan/OREO workout expenses totaled $10.0 million, increasing
$4.3 million over the third quarter of 2012 due to higher OREO workout
activity.

Added $8.9 million to accretable yield for the acquired loans
accounted for under ASC 310-30. This was partially offset by $1.6
million in impairments.

Tangible book value per share was $19.17 before consideration of the
excess accretable yield value of $0.50 per share.

Initiated regular quarterly dividend of $0.05 per share.

Approximately $400 million in excess strategic capital (above 10% Tier
1 Leverage), which positions us for future growth opportunities.

Fourth Quarter 2012 Results

(All comparisons refer to the third quarter of 2012, except
as noted)

Net Interest Income

Net interest income totaled $49.6 million for the fourth quarter of
2012, and remained stable compared to the prior quarter. Despite the
continued low interest rate environment, the fourth quarter net interest
margin widened 17 basis points to 4.09%. The expansion of the net
interest margin was benefitted by higher earning asset yields of 7 basis
points and was driven by increased yields on loan pools accounted for
under ASC 310-30. Yields earned on the ASC 310-30 loan pools improved
115 basis points from the prior quarter to 10.79% during the fourth
quarter. In addition, the cost of deposits declined 11 basis points
during the fourth quarter and continued to benefit from an improved
deposit mix and lower costs of time deposits. The benefit of the wider
net interest margin was offset by a decline in average interest earning
assets of 3.9% as we continued our strategy of exiting non-strategic
loans and slightly reduced the investment portfolio.

Loans

Strategic loans increased $41.2 million or 15.1% annualized over the
prior quarter to $1.1 billion at December 31, 2012. We realized another
quarter of increased production across the commercial loan categories
and our residential mortgage promotions continue to generate new
relationships. The credit quality of the strategic portfolio continues
to be strong with only 0.6% in non-performing loans. Strategic loans
include all originated loans in addition to those acquired loans inside
our operating markets that meet our credit risk profile. Criteria
utilized in the designation of an acquired loan as “strategic” include
(a) geography, (b) total relationship with borrower and (c) credit
metrics commensurate with our current underwriting standards.

“Our focus is on growing and expanding our relationships with
individuals and small to mid-sized businesses. We realized our eighth
consecutive quarter of increased loan production in the communities
where we do business,” said Mr. Laney. “More important, we are realizing
loan growth while maintaining very strong underwriting standards and
doing business with clients we know and understand.”

Total loans ended the fourth quarter, 2012 at $1.8 billion representing
a decrease from the prior quarter of $91.1 million or 18.7% annualized.
The decrease reflects our strategy of exiting the non-strategic loan
portfolio as adversely rated and other non-strategic relationships paid
off or paid down. The non-strategic loans totaled $719.3 million at
December 31, 2012 and decreased $132.2 million or 61.8% annualized from
September 30, 2012.

Asset Quality and Provision for Loan Losses

“We continue to have one of the lowest risk balance sheets in the
industry,” stated Chief Financial Officer Brian Lilly. “We have a risk
weighted assets to total assets ratio of 34%, which is one of the lowest
in the industry, and our loan portfolio has several risk mitigants
including: 66% of the loan portfolio carries acquisition discounts, 33%
of our loans have the added protection of FDIC loss share and 45% are
accounted for in acquired loan pools, which requires a quarterly
valuation update.”

Loans accounted for under ASC 310-30 (acquired loan pools) totaled
$830.7 million at December 31, 2012 compared to $971.0 million at
September 30, 2012. The quarterly fair value re-measurement on the
acquired loan pools resulted in a transfer of $8.9 million from
non-accretable to accretable yield while recording $1.6 million of
impairment through the provision for credit losses thereby increasing
the economic value of the acquired loan pools by an additional $7.3
million for the fourth quarter and $68.9 million on a life-to-date basis
at December 31, 2012. The increase in accretable yield will be
recognized over the remaining life of these loan pools with the quarter
recognizing just $0.3 million of the fourth quarter increase in
accretable yield.

The non 310-30 loans totaled $1.0 billion, or 55% of total loans, at
December 31, 2012. These loans are primarily comprised of originated
loans and acquired loans not accounted for under the ASC 310-30 acquired
loan pool accounting. Net annualized charge-offs for the non 310-30
loans improved to 27 basis points for the fourth quarter 2012. The
provision for loan losses on the non 310-30 loans of $1.1 million
covered the net charge-offs and provided for new loan growth resulting
in a non 310-30 allowance for loan losses to total non 310-30 loans
ratio of 1.06% as of December 31, 2012. Other real estate owned
decreased $43.7 million during the quarter primarily due to sales of
$43.0 million.

Deposits

Average transaction deposits (defined as total deposits less time
deposits) totaled $2.4 billion and grew 4.0% annualized during the
fourth quarter. Our continued focus on building client relationships
resulted in an annualized increase of 16.6% in average non-interest
bearing demand deposits. We continued to restructure our deposit base by
retaining only those acquired time deposit clients who were interested
in market rate time deposits and developing a banking relationship and
as a result, average time deposits decreased $231 million. At December
31, 2012 the mix of transaction deposits to total deposits improved to
58% from 55% at the end of the prior quarter and the cost of deposits
decreased to 0.48% in the fourth quarter representing an improvement of
11 basis points from the prior quarter. The balance sheet continues to
be primarily funded by client deposits and repurchase agreements, and at
December 31, 2012, comprised 98.5% of total liabilities.

Non-Interest Income

Banking related non-interest income (excludes FDIC related income)
totaled $10.9 million for the fourth quarter 2012 and increased $1.5
million over the prior quarter. The increase was driven by the recovery
of $1.3 million from a previously charged-off acquired loan. An
additional $1.8 million of FDIC indemnification asset negative accretion
was recorded during the fourth quarter as compared to the third quarter,
resulting from improvements in actual and expected cash flows on covered
assets. Other FDIC loss sharing income totaled $2.8 million in the
fourth quarter and increased $1.3 million due to an increase in amounts
due from the FDIC, primarily related to covered OREO write-downs.

Non-Interest Expense

Non-interest expense totaled $51.4 million during the fourth quarter of
2012, a decrease of $8.6 million from the previous quarter. The decrease
in non-interest expense during the quarter was largely due to elevated
non-interest expenses in the third quarter related to $12.5 million of
IPO related expenses, offset by increased OREO expenses in the fourth
quarter. Excluding IPO related expenses and problem loan/OREO workout
expenses, non-interest expense was flat compared to the prior quarter.
Salaries and employee benefits decreased $5.3 million driven by $4.9
million lower stock-based compensation expense related to the IPO in the
prior quarter and lower incentive-based compensation expense recorded
during the fourth quarter. The $4.7 million linked quarter increase in
OREO costs was primarily driven by the increased levels of workout
results during the quarter. The OREO and problem loan expenses are
expected to continue to fluctuate quarterly as we resolve the acquired
problem asset portfolio.

Capital

The Company’s capital ratios continue to be well in excess of federal
bank regulatory agency “well capitalized” thresholds. Shareholders’
equity totaled $1.1 billion and decreased $5.3 million during the fourth
quarter, due to a $6.2 million decrease in accumulated other
comprehensive income, net of tax, which was driven by the fair market
value fluctuations of the available-for-sale investment securities
portfolio. Tangible book value per share decreased to $19.17 at December
31, 2012 from $19.30 at September 30, 2012, as a result of the decrease
in accumulated other comprehensive income. The tangible common equity to
tangible assets ratio ended December 31, 2012 at 18.85% representing an
increase of 31 basis points from the prior quarter. This increase was
driven by lower total assets at December 31, 2012.

A common convention in the industry is to add the value of the
accretable yield to the tangible book value per share. The value of the
December 31, 2012 accretable yield balance on the ASC 310-30 loans of
$133.6 million would add $1.54 after-tax to the tangible book value per
share. A more conservative methodology, that management uses, values the
excess yield and then considers the timing of the accreted interest
income recognition over time. Under this more conservative methodology,
we first net the accretable yield on ASC 310-30 loans and the accretable
yield on the FDIC indemnification asset and then calculate the excess of
a 4.5% yield (an approximate yield on new loan originations), and
finally discount the amounts at 5%. The result would add $0.50 after-tax
to our tangible book value per share as of December 31, 2012.

Conference Call

Management will host a conference call to review the results at 11:00
a.m. Eastern Time on Tuesday, January 29, 2013. Interested parties may
listen to this call by dialing (877) 272-6762 (United States)/ (615)
800-6832 (International) using the Conference ID of 85388364 and ask for
the National Bank Holdings Corporation Fourth Quarter Earnings
conference call. A telephonic replay of the call will be available
beginning approximately two hours after the call’s completion through
February 12, 2013, by dialing (855) 859-2056 (United States)/ (404)
537-3406 (International) using the Conference ID of 85388364. The
earnings release and an on-line replay of the call will also be
available on the Company’s website at www.nationalbankholdings.com
by visiting the investor relations area.

About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including
“tangible assets,” “return on tangible assets,” “return on tangible
equity,” “tangible book value,” “tangible book value per share,”
“pre-tax pre-provision net revenue to risk weighted assets,” “adjusted
net revenue,” “adjusted non-interest expense,” and “tangible common
equity,” are supplemental measures that are not required by, or are not
presented in accordance with, accounting principles generally accepted
in the United States, or “non-GAAP financial measures.” We consider the
use of select non-GAAP financial measures and ratios to be useful for
financial and operational decision making and useful in evaluating
period-to-period comparisons. We believe that these non-GAAP financial
measures provide meaningful supplemental information regarding our
performance by excluding certain expenditures or assets that we believe
are not indicative of our primary business operating results. We believe
that management and investors benefit from referring to these non-GAAP
financial measures in assessing our performance and when planning,
forecasting, analyzing and comparing past, present and future periods.

We believe that these measures provide useful information to management
and investors that is supplementary to our financial condition, results
of operations and cash flows computed in accordance with GAAP; however
we acknowledge that our non-GAAP financial measures have a number of
limitations relative to GAAP financial measures. First, certain non-GAAP
financial measures exclude provisions for loan losses and income taxes,
and both of these expenses significantly impact our financial
statements. Additionally, the items that we exclude in our adjustments
are not necessarily consistent with the items that our peers may exclude
from their results of operations and key financial measures and
therefore may limit the comparability of similarly named financial
measures and ratios. We compensate for these limitations by providing
the equivalent GAAP measures whenever we present the non-GAAP financial
measures and by including a reconciliation of the impact of the
components adjusted for in the non-GAAP financial measure so that both
measures and the individual components may be considered when analyzing
our performance.

A reconciliation of our non-GAAP financial measures to the comparable
GAAP financial measures is included at the end of the financial
statement tables.

About National Bank Holdings Corporation

National Bank Holdings Corporation is a bank holding company created to
build a leading community bank franchise delivering high quality
customer service and committed to shareholder results. National Bank
Holdings Corporation currently operates a network of 101 full-service
banking centers, with the majority of those banking centers located in
Colorado and the greater Kansas City region. Through the Company’s
subsidiary, NBH Bank, N.A. it operates under the following brand names:
Bank Midwest in Kansas and Missouri, Community Banks of Colorado in
Colorado and California and Hillcrest Bank in Texas.

Forward Looking Statements

This press release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements contain words such as “believes,” “expects,”
“may,” “should,” “will,” “seeks,” “approximately,” “intends,” “plans,”
“estimates,” “targets” or “anticipates” or similar expressions that
relate to the Company’s strategy, plans or intentions. Forward-looking
statements are statements about future, not past, events and involve
certain important risks and uncertainties, any of which could cause the
Company’s actual results to differ materially from those expressed in
forward-looking statements, including, without limitation, the factors
more fully described under the caption “Risk Factors” in the last
quarterly report we filed with the Securities and Exchange Commission
and: (1) changes in business and economic conditions generally and in
the financial services industry; (2) changes in the laws, regulations
and the regulatory environment; (3) the Company’s ability to identify
potential candidates for, consummate, integrate and realize operating
efficiencies from, acquisitions of banking franchises on attractive
terms, or at all; (4) the Company’s ability to achieve organic loan and
deposit growth and the composition of such growth; (5) a weakening of
the economy which could materially impact credit quality trends and
local real estate values; and (6) increased competition in the financial
services industry, nationally, regionally or locally. Except as required
by law, the Company undertakes no obligation to publicly update or
revise any forward-looking statement as a result of new information,
future events or otherwise. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date
on which they are made and which reflect management’s estimates,
expectations or beliefs as of such time. For a discussion of additional
risks and uncertainties that may affect the future results of the
Company, please see the Company’s filings with the Securities and
Exchange Commission.

Loss-Share Coverage and Accounting Treatment Period End Loan
Balances:

December 31, 2012

Total covered loans

Total non-covered loans

310-30

Non-310-30

Totalcovered

310-30

Non-310-30

Total non-covered

Commercial

$

73,802

$

47,307

$

121,109

$

9,484

$

140,112

$

149,596

Commercial real estate

397,190

13,693

410,883

177,407

225,271

402,678

Agriculture

38,890

17,094

55,984

8,843

108,580

117,423

Residential real estate

18,956

2,180

21,136

87,144

430,465

517,609

Consumer

3

-

3

18,981

31,347

50,328

Total

$

528,841

$

80,274

$

609,115

$

301,859

$

935,775

$

1,237,634

September 30, 2012

Total covered loans

Total non-covered loans

310-30

Non-310-30

Totalcovered

310-30

Non-310-30

Total non-covered

Commercial

$

83,469

$

57,416

$

140,885

$

14,195

$

111,147

$

125,342

Commercial real estate

477,427

11,081

488,508

187,344

236,772

424,116

Agriculture

44,738

14,939

59,677

11,206

90,373

101,579

Residential real estate

19,584

2,371

21,955

106,710

412,322

519,032

Consumer

4

-

4

26,359

30,342

56,701

Total

$

625,222

$

85,807

$

711,029

$

345,814

$

880,956

$

1,226,770

NATIONAL BANK HOLDINGS CORPORATION

Summary of Net Interest Margin

(Dollars in thousands)

Three months ended December 31, 2012

Three months ended September 30, 2012

Average

Average

Average

Average

Balance

Interest

Rate

Balance

Interest

Rate

Interest earning assets:

310-30 loans

$

890,787

$

24,156

10.79

%

$

990,661

$

24,008

9.64

%

Non 310-30 loans

1,029,059

16,210

6.27

%

968,652

16,097

6.61

%

Investment securities available-for-sale

1,676,518

8,269

1.96

%

1,747,254

9,302

2.12

%

Investment securities held-to-maturity

617,821

5,323

3.43

%

683,700

5,888

3.43

%

Other securities

33,036

393

4.73

%

33,067

377

4.54

%

Interest-bearing deposits

576,100

357

0.25

%

595,383

370

0.25

%

Total interest earning assets

$

4,823,321

$

54,708

4.51

%

$

5,018,717

$

56,042

4.44

%

Cash and due from banks

66,214

66,467

Other assets

541,354

585,735

Allowance for loan losses

(16,518

)

(15,817

)

Total assets

$

5,414,371

$

5,655,102

Interest bearing liabilities:

Savings deposits and interest bearing checking

$

1,693,737

$

1,173

0.28

%

$

1,696,972

$

1,341

0.31

%

Time deposits

1,832,790

3,930

0.85

%

2,063,622

5,178

1.00

%

Securities sold under agreements to repurchase

45,014

21

0.19

%

53,073

27

0.20

%

Total interest bearing liabilities

$

3,571,541

$

5,124

0.57

%

$

3,813,667

$

6,546

0.68

%

Non-interest bearing demand deposits

662,763

636,277

Other liabilities

89,450

107,415

Total liabilities

4,323,754

4,557,359

Stockholders' equity

1,090,617

1,097,743

Total liabilities and stockholders' equity

$

5,414,371

$

5,655,102

Net interest income

$

49,584

$

49,496

Interest rate spread

3.94

%

3.76

%

Net interest earning assets

$

1,251,780

$

1,205,050

Net interest margin

4.09

%

3.92

%

Ratio of average interest earning assets to average interest
bearing liabilities

135.05

%

131.60

%

(1) Originated loans are net of deferred loan fees, less costs.

(2) Loan fees, less costs on originated loans, are included in
interest income.

NATIONAL BANK HOLDINGS CORPORATION

(Dollars in thousands)

Allowance For Loan Losses Analysis (2):

As of and for the three months ended:

December 31, 2012

September 30, 2012

310-30

Non-310-30

Total

310-30

Non-310-30

Total

Beginning allowance for loan losses

$

7,110

$

10,386

$

17,496

$

7,259

$

10,035

$

17,294

Net chargeoffs

(4,078

)

(708

)

(4,786

)

(3,812

)

(1,249

)

(5,061

)

Provision

1,620

1,050

2,670

3,663

1,600

5,263

Ending allowance for loan losses

$

4,652

$

10,728

$

15,380

$

7,110

$

10,386

$

17,496

Annualized net charge-offs to average loans, respectively

1.82

%

0.27

%

0.99

%

1.53

%

0.51

%

1.03

%

% of net charge-offs from covered loans, respectively

55.19

%

6.09

%

47.92

%

69.02

%

21.10

%

57.19

%

Ratio of allowance for loan losses to total loans outstanding at
period end, respectively

0.56

%

1.06

%

0.83

%

0.73

%

1.07

%

0.90

%

Ratio of non-performing loans to loans

-

4.02

%

2.21

%

-

3.89

%

1.94

%

Ratio of allowance for loan losses to non-performing loans

-

26.25

%

37.64

%

-

27.62

%

46.52

%

Ratio of allowance for loan losses to non-covered loans
outstanding at period end, respectively

1.54

%

1.15

%

1.24

%

2.06

%

1.18

%

1.43

%

Ratio of allowance for loan losses to non-performing, non-covered
loans

-

36.03

%

51.66

%

-

34.52

%

58.14

%

Total loans outstanding at period end

$

830,700

$

1,016,049

$

1,846,749

$

971,036

$

966,763

$

1,937,799

Total average loans during the period

$

890,787

$

1,029,059

$

1,919,846

$

990,661

$

968,652

$

1,959,313

Non-covered loans

$

301,859

$

935,775

$

1,237,634

$

345,814

$

880,956

$

1,226,770

Total non-performing loans

$

-

$

40,864

$

40,864

$

-

$

37,606

$

37,606

Non-performing, non-covered loans

$

-

$

29,772

$

29,772

$

-

$

30,092

$

30,092

Past Due Loans (2):

December 31, 2012

September 30, 2012

310-30

Non-310-30

Total

310-30

Non-310-30

Total

Non-accrual loans

$

-

$

23,119

$

23,119

$

-

$

21,976

$

21,976

Loans 30-89 days past due and still accruing interest

18,413

4,580

22,993

47,772

14,018

61,790

Loans 90 days past due and still accruing interest

155,440

25

155,465

143,953

50

144,003

Total past due and non-accrual loans

$

173,853

$

27,724

$

201,577

$

191,725

$

36,044

$

227,769

Total past due and non-accrual loans to total loans, respectively

20.93

%

2.73

%

10.92

%

19.74

%

3.73

%

11.75

%

% of total past due and non-accrual loans that carry fair value
marks

100.00

%

42.96

%

92.16

%

100.00

%

55.32

%

92.93

%

% of total past due and non-accrual loans that are covered by FDIC
loss sharing agreements, respectively

75.49

%

22.26

%

68.17

%

66.78

%

33.14

%

61.45

%

Asset Quality Data (Covered/Non-covered) (2):

December 31, 2012

September 30, 2012

Non-covered

Covered

Total

Non-covered

Covered

Total

Total non-accrual loans

$

17,074

$

6,045

$

23,119

$

16,597

$

5,379

$

21,976

Total loans 90 days past due and still accruing interest

25

-

25

50

-

50

Accruing restructured loans (1)

12,673

5,047

17,720

13,445

2,135

15,580

Total non-performing loans

29,772

11,092

40,864

30,092

7,514

37,606

OREO

41,072

44,618

85,690

64,822

64,523

129,345

Other repossessed assets

800

531

1,331

801

530

1,331

Total non-performing assets

$

71,644

$

56,241

$

127,885

$

95,715

$

72,567

$

168,282

Allowance for loan losses

-

-

$

15,380

-

-

$

17,496

Total non-performing loans to loans, respectively

2.41

%

1.82

%

2.21

%

2.45

%

1.06

%

1.94

%

Total non-performing assets to total assets

-

-

2.36

%

-

-

3.05

%

(1) Includes restructured loans less than 90 days past due and still
accruing.

(2) Loans accounted for under 310-30 were written down at the
acquisition date and are carried at an amount estimated to be
collectible and the related allowance for loan losses was not
carried over to NBHC’s allowance. These loans are not classified as
nonaccrual or non-performing. Any losses on these loans are charged
against the non-accretable difference and are not recorded as
charge-offs until the non-accretable difference is fully utilized.
As a result of the accounting for purchased loans accounted for
under 310-30, certain ratios are not comparable with those of other
banks.

Interest earning assets include assets that earn interest/accretion
or dividends, except for the FDIC indemnification asset that earns
accretion but is not part of interest earning assets. Any market
value adjustments on investment securities are excluded from
interest-earning assets. Interest bearing liabilities include
liabilities that must be paid interest.

(5)

Interest rate spread represents the difference between the weighted
average yield on interest earning assets and the weighted average
cost of interest bearing liabilities.

(6)

Net interest margin represents net interest income, including
accretion income on interest earning assets, as a percentage of
average interest earning assets.

(7)

The efficiency ratio represents non-interest expense, less
intangible asset amortization, as a percentage of net interest
income plus non-interest income.

(8)

Non-performing loans consist of non-accruing loans, loans 90 days or
more past due and still accruing interest and restructured loans,
but exclude any loans accounted for under ASC 310-30 in which the
pool is still performing. These ratios may, therefore, not be
comparable to similar ratios of our peers.

(9)

Non-performing assets include non-performing loans, other real
estate owned and other repossessed assets.